Finally, Kansas City has a new deal for its first new convention hotel since 1985.
The Land Clearance for Redevelopment Authority, an agency that grants tax breaks, on Wednesday approved a slew of new agreements with KC Hotel Property Owner LLC, the new owner of the 800-room project.
That helps pave the way for an expected Jan. 2 groundbreaking for the $322 million project, with an expected completion date of 2020. That’s just months before 20,000 visitors are supposed to arrive as part of the Shriners International convention in July 2020.
“This has been quite a journey since we started,” said Mike Burke, a Kansas City attorney who has worked on the project for several years.
Loews Hotels will own and operate the Kansas City Convention Hotel, one of 24 hotels in the company’s portfolio in North America.
A new hotel has been long coveted by Kansas City business, tourism and civic officials who have seen the city’s standing in the convention business continually drop off over the years. The convention business is a highly competitive industry with cities continually adding new hotel and meeting spaces in an attempt to keep ahead of competitors.
The Loews hotel is Kansas City’s first new major convention hotel since The Vista, now the downtown Marriott, opened in 1985.
“You already have a vibrant downtown, you have a world class convention center,” said Alex Tisch, vice president of the Loews Corporation, a publicly traded conglomerate that also owns drilling, pipeline and insurance businesses. “You really need a four-star hotel.”
Tisch said that of the six hotel projects Loews is currently constructing, the Kansas City one gets the most attention.
“Right now this is, hands down, the one where we've received the most calls to take out the whole hotel, which means big groups want to use the whole convention center,” Tisch said.
Wednesday’s meeting was a long-awaited development in the extended saga of the convention hotel since it first publicly announced in May 2015. The project will go before the Tax Increment Financing Commission on Thursday morning, and the developers are expected to brief the Kansas City Council later in the day.
The next several weeks will be spent stitching up a complicated financing deal.
Several circumstances contributed to ongoing delays with construction of the project. A lawsuit by Citizens For Responsible Government initially held up the hotel’s project. But also land title and acquisition issues at the corner of 16th Street and Baltimore Avenue, where the hotel will be built, also slowed the project.
Hyatt was the original hotel flag when the project was announced, but the development team switched to Loews, a luxury hotel owner and operator, earlier this year.
“We own our assets,” Tisch said while comparing the difference between Loews and other major hotel competitors. “We’re in them for the long term...The owner-operator model and thinking like an owner allows us to punch above our weight.”
The inclusion of Loews, as well as the increase in construction costs in recent years, contributed to the increase in costs from the original $310 million price tag on the project.
Loews, along with the hotel development team that includes New York financier Steve Rattner and Denver hotel developer Tim O’Byrne, will contribute nearly $60 million in equity to the project. Most of the equity comes from Loews.
“That amount of equity has grown dramatically over the years,” Rattner said.
KC Hotel Property Owner LLC obtained a $110 million construction loan from Wells Fargo. Kansas City is contributing $35 million from its convention and tourism fund to the project. The developers will sell bonds, which will be repaid by assessments and new tax revenues generated by the project to account for the rest of the cost.
Taxpayers aren’t on the hook for cost overruns, construction delays or if the project fails, under the financing structure approved by the LCRA.
“That liability is solely on the developers,” Rattner said.